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- Free trading
- No minimum deposit
- Access cryptocurrencies
- Get stock news alerts
- Potential data delays
- The app is prone to issues
Best Investment Apps
$5 minimum account investment with $1 monthly fee
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Start investing with as little as $5
Buy fractional shares of stocks in companies like Amazon or Apple
Only $1 monthly fee (for accounts under $5,000) or 0.25% annual fee for accounts over 5k
According to a Gallup poll, 55% of Americans own stock. However, there appears to be a financial barrier to entry, as this figure drops to 22% in households with an annual income of less than $40,000.
Traditionally, trading was a costly process and many people were unable to pay the hefty admin fees and commission.
This is where Robinhood has bridged the gap. In this Robinhood review, I will examine this platform to help you decide if it could be a good option for you.
What is Robinhood?
Robinhood is a trading app that allows investors to trade options, stocks, and cryptocurrencies with no commission or fees. In fact, Robinhood was one of the first brokers to offer free trades.
Since many big name brokers now also offer free online trading with no fees or commissions, Robinhood has developed new features to stand apart from its competition.
Is Robinhood Legit?
Robinhood is very upfront about how it makes money. Is completely legit that there is no commission or fees. Additionally, your funds have SIPC (Securities Investor Protection Corporation) protection. This provides protection for up to $250,000 in cash and up to $500,000 in securities. Unfortunately, cryptocurrency investments do not have SIPC protection.
Just like other stockbroker firms, Robinhood is also regulated by the SEC (Securities and Exchange Commission. Robinhood is a member of the self regulatory organization, FINRA (Financial Industry Regulatory Authority).
Of course, no platform is perfect. Robinhood has had some issues. In early 2020, there were issues with account locking and outages. Unfortunately, this was during one of the most volatile periods in market history. The Robinhood team put these issues down to high account sign up and high order activity. But, there have been outages since then.
Commission Fee Trading and Investing With SIPC Protection.
How Does Robinhood Work?
Robinhood operates through an app on your Android or iOS device. This allows you to conduct a number of investment activities.
Once you sign into the app using your fingerprint or password, you will see a “search” icon. This is how you search for stocks that you wish to trade. It is both free and simple to find the page for companies that appeal to you.
You can pull up pages that show the basic company details and the recent price information.
Since there are no commission fees, you don’t need to worry about trying out small amounts of stock. So, you can buy $20 or $30 of a particular stock, just to try it out.
The Robinhood platform supports limit orders, stop orders, stop limit orders and market orders. You can also employ good til cancel or good for the day parameters. The account screen will also show a number of day trades, so you can try your hand in this potentially risky area of trading.
Options provide access to contracts with no commissions, assignment fees or per contract fees. The Robinhood options trading features helpful filters and advanced strategies. The platform also allows for trading multi leg option strategies within a single order. So, you can monitor any complex contracts together.
Options trading is not usually a good idea for beginners. However, if you have investment experience, Robinhood makes it easy to trade in options.
Both newbie and experienced investors are buzzing about cryptocurrencies. Robinhood has stepped up to allow cryptocurrency trading on the platform. You can buy and sell popular currencies including:
- Bitcoin Cash
- Ethereum Classic
The access to crypto trading is rolling out across the US. Approximately 50% of the country can use Robinhood Crypto. However, even if you don’t currently have access to buy and sell, you can still access market data and prices for 16 popular cryptocurrencies.
Additionally, Robinhood extends the no fee trading to crypto. This offers a significant advantage over many of the well known digital wallet platforms and providers.
Enjoy Trading in Stocks, Options and Crypto
Other Features of Robinhood
Robinhood continues to develop its platform. Now it has even more functionality. After your Robinhood login, you can access features including:
To compete with some well known brokers, Robinhood now offers fractional shares. This allows those with a more modest investment fund to access higher profile companies. So, even if the full share price is hundreds of dollars, you can gain access for $1 or more per portion.
This feature will allow you an easier path to create a diverse portfolio. You can buy fractional shares in more companies, even if you don’t have a lot of investment capital.
Offering fractional shares also provides an opportunity for dividend reinvestment. Robinhood’s program is a valuable strategy to help you build wealth over time.
This new feature pairs well with fractional trading. You can set a dollar amount and schedule, such as weekly, monthly or biweekly. Robinhood will then invest the amount automatically.
This is not uncommon among brokers. But, being able to use it with fractional shares makes Robinhood stand out from the competition. Recurring investments are typically “buy by the share”, which can leave you with uninvested cash. However, by specifying a dollar amount, Robinhood solves the problem.
High Yield Saving
The platform also features a cash management account. This account currently pays 0.30% and it provides a debit card. You can enjoy free ATM withdrawals at over 75,000 ATMs. There is also FDIC insurance of up to $1.25 million.
Superb Research Offerings
Another stand out feature of the platform is the research offerings. This is one area where Robinhood used to lack information compared to other brokers. However, the company has increased the available research and tools in recent years.
You can now benefit from analyst ratings, earnings calendars, lists of top movers, links to earnings calls. There are also candlestick charts and the platform resurfaces information from Robinhood customers to create its own data universe.
For example, you can look at the 100 most popular stocks on Robinhood and then sort them. The sorting criteria includes what’s rising or falling, market price, market cap and analyst ratings.
There is also access to some superb data sources including:
- Wall Street Journal Markets
- CNBC Business
A Streamlined Interface
While Robinhood may not offer all the trappings of the typical online broker, the platform has a streamlined interface that makes it easy to use. It supports limit orders, stop orders, market orders and stop limit orders. So, you can quickly execute trades.
There is even a feature where stocks are organized by category or sector. These collections include companies within a particular sector or those with female CEOs.
If you’re using the web platform, you can sort the collections and create side by side stock comparisons.
The interface also has a tab bar at the bottom of the screen to provide quick access to your transaction history, account statements, portfolio values and watch lists.
Robinhood Commission and Fees
Unlike many companies, Robinhood has stuck by its commitment to provide completely free trading. This can add up to significant savings for frequent traders or remove the barrier to entry for newbies.
In fact, Robinhood is one of the few brokers that doesn’t charge per contract fees.
The company shows commitment to keep investor costs low. There is even a Clearing by Robinhood service, which allows companies to offer their own clearing system. This reduces service account fees.
One of the most significant fees is a $75 outgoing account transfer fee. This applies when you transfer your investment to another broker. This is not unusual for brokers to charge this type of fee to encourage you to stick with them. However, there are no fees for selling investments and transferring the funds to your bank account.
Additionally, Robinhood does not have any account minimums to worry about. This will allow you to begin investing immediately. All you’ll need is sufficient funds to purchase the investment of interest to you.
However, if you want to open a margin account, you will need a $2,00 minimum portfolio balance. This applies to all brokers, as it is a regulation of the Financial Industry Regulatory Authority.
If you’re a more serious trader, you may wish to consider upgrading to Robinhood Gold. This is a fee based service similar to BLUE service offered by rival broker Motif. These monthly subscription plans allow low cost brokerage firms to recoup lost revenue.
Gold investment is a good fit for more active traders. You can upgrade your account to a margin account. This allows you to buy and sell stocks on credit. This is not recommended for newbie investors. If you don’t understand margin calls, it is best you stick with the basic Robinhood version.
The subscription plan also provides access to in depth analysis and Morningstar research on more than 1,700 stocks. There is also access to extended hours pre market trading. You will have access 30 minutes before market opening and two hours after market closure. This is a useful feature when you want to get the jump on a trade when big news hite the market.
Gold also provides instant deposit access. This a significant upgrade over the three day hold for deposited funds on the standard plan.
|In depth analysis and Morningstar research on more than 1,700 stocks||No||Yes|
|Extended hours pre market trading||No||Yes|
|Market access 30 minutes before market opening and two hours after market closure. (This is a useful feature when you want to get the jump on a trade when big news hite the market.)||No||Yes|
|Instant deposit access. (This a significant upgrade over the three day hold for deposited funds on the standard plan.)||No||Yes|
The plan starts at $5 per month. This is up to $1,000 margin. Above this point, there is a 5% interest charge.
Gold provides a great option if you’re an active trader with investment experience. It provides lots of services that are typically more expensive with a conventional firm. But, if you’re an investment newbie, it would be a better idea to stick with the basic Robinhood plan.
Robinhood Pros & Cons
- Free Trading: The biggest pro has to be free trading. There are no Robinhood hidden fees or charges for any trade.
- Access to Crypto: You can trade or just track cryptocurrencies.
- News Notifications: Robinhood will provide notifications of earnings announcements and other news for stocks in your watch list and portfolio.
- No Minimum Deposit: Unlike many brokers, Robinhood does not have a minimum deposit or balance requirement.
- Possibility to Upgrade: You can upgrade to Robinhood Gold if you’re a more experienced trader
- App Failures: One of the biggest Robinhood review complaints is that the app is prone to failures. In March 2020, there were three failures in two weeks. This is a major concern for real time trading.
- Lacking Functionality: The platform does lack some of the resources and functions that you may find with other brokers and brokerage platforms.
- Not Particularly Intuitive: While Robinhood aims to offer a streamlined interface, it can fail to be intuitive at times. One Robinhood review comment highlighted an issue with being unable to find a “trade” button. It took them a while to discover they needed to click “search”.
- Potential Data Delays: There is a possibility that quote data could have delays by up to 20 minutes.
- There is a Minimum Balance for Margin Accounts: If you want a margin account, you’ll need a minimum portfolio balance of $2,000
Is Robinhood Good for Beginners?
With no account minimums and free trades, Robinhood is a great option for beginners. Many newbies have limited investment funds or are wary about losing larger sums of money. So, you can experiment with smaller trades without worrying about commission or other trade fees.
In fact, the fractional shares makes it even easier for beginners to invest in household name stocks that could otherwise cost hundreds of dollars per share. For example, Google shares currently cost over $1,700 each. This is likely to be far beyond the reach of many new investors. But, with fractional shares, you can invest $5 or $10 and get a piece of a Google share.
While it may lack some of the tools and analysis of other brokerage platforms, Robinhood does provide educational resources to help you develop your investment experience.
Robinhood does allow commission free trading. There are no fees to open or maintain your account or transfer funds. However, there are some fees for certain actions, such as outgoing account transfers.
Yes, Robinhood is a legit platform that offers fund guarantees of up to $250K for cash and $500K for securities through the SIPC. So, your money is safe, allowing you to concentrate on trading.